The Canadian venture capital business is mired in a terrible rut- and it's bad news for startups, especially in the technology business.
Last year VCs managed to pull in only $819-million from investors, down more than 20 per cent from 2009, hitting a harrowing 16-year low.
The situation didn't get any better at the start of this year, with investors putting up $217-million in the first three months of 2011, down a stark 44 per cent from the terrible 2010.
It looks even worse when compared with the United States, where the hot VC market is fuelled by the hunt for the next Facebook and Twitter. U.S. VC funds lured $7.1-billion from investors in the first quarter this year, up almost 80 per cent from a year earlier.
The comparison does not reflect well on Canada: VC investments, as a percentage of the economy, stands at less than half of that in the U.S.
Amid this milieu, the annual gathering of Canada's Venture Capital & Private Equity Association takes places in Vancouver this week and Thursday afternoon welcomes local tech legend Don Mattrick to a panel discussion.
Mr. Mattrick, at 17, founded Distinctive Software Inc. in the early 1980s. The whiz kid programmer led the firm until its acquisition by Electronic Arts in 1991. From there Mr. Mattrick rose the EA ranks before he jumped to Microsoft Corp. in 2007, where he is among the company's top 17 executives as president of the interactive entertainment business.
In an e-mail interview, Mr. Mattrick discussed the state of venture capital in Canada and the technology business. One key, Mr. Mattrick said, is Canadians have to play harder: "When I compare and contrast the tone of U.S. based entrepreneurs, venture capitalists and academic institutions, they are more aggressive."
Why hasn't Canada, or specifically Vancouver, seen the rise of more names like Distinctive and Crystal Services [now part of SAP]
Those companies really thrived in the '80s and '90s, demonstrating remarkable growth during a time that became the tech boom. There are still opportunities for Canadian companies but lately investors have been looking for additional assurance from the tech sector. I am personally seeing more and more opportunities and innovations despite the investment community being more cautious in 2011.
Why has the venture-capital business struggled in Canada and what's needed to spark momentum?
Knowledge-based industries take time to grow and develop. Canada has approximately one-tenth of the population of the United States so, ideally, we would be posting relative wins at that rate. When I compare and contrast the tone of U.S. based entrepreneurs, venture capitalists and academic institutions, they are more aggressive in terms of team building, market sizing and pace of execution over all. We need to find a way for more people in Canada to get exposed to that type of eco-system. That being said, we have enjoyed some successes like Bioware, Crystal Decisions, Club Penguin and Webkinz.
What are the most promising things happening in Canadian technology today?
Personally, I am most inspired by what's happening in the interactive entertainment industry in Canada. We are currently experiencing a major global transformation, which is making gaming and entertainment more approachable and interactive. A great deal of that work is coming out of Canadian studios.
Comparing and contrasting Seattle and Vancouver, is Microsoft the single reason why Seattle is a technology capital whereas Vancouver has its strengths but isn't a major player?
I don't think it's down to one ingredient. Microsoft has definitely contributed, as have other companies and industries, to build an amazing ecosystem of partners in Seattle, and more so in the Pacific Northwest, including the Vancouver area. The key question is what are we doing as a region to court the next wave of innovation and growth?
In technology in general, what are a couple of the biggest challenges and opportunities in the next several years?
[Several]things spring to mind.
1: Creating world-class teams is both an opportunity and a challenge. Leadership and talent are ingredients that enhance performance. People are mobile, highly sought after and tend to move to places that offer the best mix of career opportunity and quality of life. Canada has a good start but we need to benchmark where people are going to and ensure that we have the equivalent environment in place to attract and retain this talent.
2: Market expansion will be substantial in the next 5 to 7 years. At a macro level, we should see approximately 2.4-billion smart, connected devices growing to 4.6-billion in this time-frame.
On the personal front, your name has been suggested as a potential candidate to run Microsoft when Steve Ballmer retires – what are your ambitions, thoughts on your career, given that you are one of Canada's most successful technology entrepreneurs/executives ever.
That is very flattering but I don't like to speculate on what the future holds. This is a very exciting time in my career and I am thankful to be a part of the current transformations [at Microsoft]
This interview has been condensed and edited.